MOSCOW (Reuters) - European Central Bank President Mario Draghi on Friday criticized “chatter” on currencies that has roiled foreign exchange markets in recent weeks.
“All this chatter that has been undertaken in the past few weeks is either inappropriate or fruitless - in all cases it’s self-defeating,” Draghi told reporters before a meeting of Group of 20 finance officials in Moscow.
Draghi declined - in line with policy - to say whether the euro’s exchange rate was appropriate but noted it was in line with long-term averages in nominal and real terms.
He declined to be drawn into the international controversy that has escalated over the expansive policies pursued by Japan’s new government that have weakened the yen.
“The mandate of the ECB is to pursue price stability in both directions in the medium term,” he told a news conference after meeting Russian central bankers.
“The exchange rate is not a policy target, but the exchange rate is important for growth and price stability.”
He also avoided pre-empting a debate on the wording of a G20 communique on currencies and borrowing by governments, but made it clear that he favored structural reforms as a path to growth rather than ramping up state borrowing.
“We don’t believe that inflating budget deficits to create demand is sustainable,” Draghi said.
“We believe that the primary factor creating jobs and growth is, for the euro area, structural reforms.”
Commenting on Thursday’s data showing the euro zone’s gross domestic product contracted more sharply in the fourth quarter of 2012 than most economists had forecast, Draghi said it was “more negative than expected”.
But he said he saw increasing signs of the stabilization of economic activity at low levels. Business confidence was rising and both companies and governments were finding it easier to fund their spending needs.
Early repayments by banks of borrowing under the ECB’s long-term refinancing operations (LTRO) were “a sign that confidence is returning in the euro area.”
“Uncertainty about funding has been reduced for the banks that are repaying the LTRO,” Draghi said.
He added the ECB’s monetary policy stance “remains accommodative” and it would continue to offer LTRO funding on a full allotment basis.
Reporting by Douglas Busvine; Editing by Maria Kiselyova and Patrick Graham